12 Concepts We Can Learn About Fund Raising From How2Exit's Interview W/ Will Sachs - Watch Here
Here is what my team and I learned from this interview: (These are notes from team members, writers, sometimes AI, and even listeners who submitted what i learned loosely edited and shared here) - If it seems a bit unrefined, you're reading our notes, so. yeah. -Ron
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Concept 1: Venture Capital Empowers Entrepreneurs
Venture capital empowers entrepreneurs by providing them with the necessary financial resources to turn their ideas into reality. This form of funding allows entrepreneurs to access capital that they may not have been able to secure through traditional means such as bank loans or personal savings. With venture capital, entrepreneurs can pursue high-growth opportunities and scale their businesses at a faster pace.
One example of how venture capital empowers entrepreneurs can be seen in the story of Will Sachs, the founder of Fulcrum Venture Accelerator. Will started his entrepreneurial journey in college when he and a group of like-minded individuals decided to build a solar-powered race car. In order to fund their project, they reached out to local businesses and secured sponsorships. This experience showed Will the power of enrolling others in his ideas and the potential for securing financial backing.
Years later, Will founded Kindara, a women's health platform, with the goal of becoming a venture-funded CEO. Through venture capital funding, he was able to attract investors who believed in his vision and provided the necessary resources to build and grow the company. Eventually, Kindara was sold in 2018, showcasing the success that can come from venture capital-backed ventures.
Venture capital not only provides entrepreneurs with financial support but also brings in valuable expertise and networks. Venture capitalists often have extensive industry knowledge and connections that can help entrepreneurs navigate challenges, make strategic decisions, and open doors to new opportunities. This support can be crucial, especially for early-stage startups that are still finding their footing in the market.
Moreover, venture capital funding allows entrepreneurs to focus on their core competencies and business growth rather than spending excessive time and energy on fundraising. With financial backing secured, entrepreneurs can allocate their resources towards product development, marketing, hiring talent, and expanding their operations. This enables them to accelerate their growth trajectory and seize market opportunities.
Additionally, venture capital can provide entrepreneurs with a stamp of credibility. When reputable venture capitalists invest in a startup, it signals to other potential investors, customers, and partners that the business has potential and is worth considering. This validation can help entrepreneurs attract further funding, establish strategic partnerships, and gain market traction.
In conclusion, venture capital empowers entrepreneurs by providing them with the necessary financial resources, expertise, networks, and credibility to pursue their business ideas and scale their ventures. It enables entrepreneurs to access capital that may not be available through traditional means, accelerates their growth trajectory, and opens doors to new opportunities. Through venture capital, entrepreneurs can turn their visions into reality and create successful and impactful businesses.
Concept 2: Fundraising Follows A Natural Progression
The podcast highlights the natural progression that fundraising follows. The speaker outlines a five-step process that can be applied to any fundraising endeavor, whether it is raising capital or acquiring companies. The stages are tilling, planting, watering, harvesting, and closing.
The first stage, tilling, involves mental preparation. Entrepreneurs must believe wholeheartedly in their venture and view it as an exceptional opportunity. They need to identify any gaps in their belief and take steps to address them, such as seeking more information, involving more people, or leveraging connections. Fundraising is ultimately a transfer of excitement and certainty, so having full certainty in the venture is crucial.
The second stage, planting, focuses on external preparation. Entrepreneurs need to prepare their slides, storytelling, and lists of potential investors. They must fortify themselves with everything they need to present their venture effectively and convincingly. This stage is about laying the groundwork for the fundraising process.
The third stage, watering, is about finding a lead investor or anchor investor. This is the person or entity that will take a significant portion of the investment round or acquisition price. Finding this lead investor provides momentum and credibility to the fundraising effort. While smaller investors can still be pursued, securing a lead investor is essential for progress.
The fourth stage, harvesting, involves rounding out the rest of the investment round. Entrepreneurs need to leverage the excitement and interest generated by the lead investor to attract other investors. This stage is about bringing all the interested parties together and finalizing the investment round.
The final stage, closing, is where all the administrative tasks and paperwork are completed. This includes getting all the necessary documents signed and addressing any outstanding issues. The goal is to ensure that the funds are transferred and the deal is closed, allowing the entrepreneur to access the capital they need.
By understanding and following this natural progression, entrepreneurs can navigate the fundraising process more effectively. Each stage has its own specific tasks, skills, and dynamics. By knowing which stage they are in, entrepreneurs can focus on the appropriate actions and move closer to their fundraising goals.
The podcast also highlights some key lessons learned from the speaker's own experiences. One lesson is the importance of having full certainty and belief in the venture being pitched. This certainty is the currency that will be traded for investment. Another lesson is the importance of asking for enough money. Underestimating the funding required can hinder the success of the venture.
In conclusion, fundraising follows a natural progression that can be applied to any fundraising endeavor. By understanding the stages of tilling, planting, watering, harvesting, and closing, entrepreneurs can navigate the fundraising process more effectively. Each stage has its own specific tasks and dynamics, and by focusing on the appropriate actions, entrepreneurs can increase their chances of success.
Concept 3: Match Investor With Business Opportunity
One crucial aspect of fundraising is matching the investor with the business opportunity. This means finding investors who are not only interested in the business idea but also have the financial capacity to invest in it. It is important to align the goals and interests of the entrepreneur with those of the investor to ensure a successful partnership.
Another factor to consider when matching investors with business opportunities is the size of the investment. Different investors have different check sizes, and entrepreneurs need to approach the right investors who can provide the funding they need. For example, if an entrepreneur is looking for a seed round or pre-seed round investment, they should approach investors who are comfortable writing smaller checks. On the other hand, if they need a larger investment, they should target investors who have the capacity to write bigger checks.
Furthermore, it is important to research and understand the investment preferences of potential investors. This includes looking at their previous investments and determining whether they have experience in the entrepreneur's industry or category. By approaching investors who have a track record of investing in similar businesses, entrepreneurs can increase their chances of finding a match. Just as product-market fit is crucial in marketing, opportunity-investor fit is important in fundraising. Entrepreneurs need to find investors who are interested in their specific business opportunity and have the knowledge and experience to make an informed investment decision.
In conclusion, matching investors with business opportunities is a critical aspect of fundraising. Entrepreneurs need to find investors who align with their values and goals, have the financial capacity to invest, and understand the industry or category in which the business operates. By researching and targeting the right investors, entrepreneurs can increase their chances of finding the right match for their business opportunity. This alignment is crucial for a successful partnership and can greatly contribute to the overall success of the business.
Concept 4: Raise Minimum Check Size
One important factor to consider when raising funds is the concept of raising the minimum check size. The minimum check size refers to the minimum amount of money that an investor is willing to invest in a particular opportunity. This concept is crucial because it can greatly impact the dynamics of the investor-entrepreneur relationship and can ultimately determine the success or failure of the investment.
One reason why entrepreneurs should aim to raise the minimum check size is that it can lead to more favorable relationships with investors. When an investor is willing to write a larger check, it often indicates that they have a higher level of confidence in the business opportunity. This confidence can translate into a more hands-off approach from the investor, allowing the entrepreneur to have more autonomy and control over the business operations. On the other hand, when an investor writes a smaller check, they may feel more entitled to be involved in the decision-making process and may require more frequent updates and communication. This can create a more difficult and time-consuming relationship for the entrepreneur.
Furthermore, raising the minimum check size can also attract investors who have a higher risk tolerance and a greater capacity for investment. When an investor is willing to write a larger check, it suggests that they have a greater financial capacity and are less likely to be financially devastated if the investment does not perform as expected. This can provide entrepreneurs with a greater sense of security and stability, knowing that their investors are not overly reliant on the success of the investment. On the other hand, investors who write smaller checks may be more financially vulnerable and may exert more pressure on the entrepreneur to ensure the success of the investment.
In addition to attracting more favorable relationships and financially stable investors, raising the minimum check size can also be a strategic move for entrepreneurs. By targeting investors who are willing to write larger checks, entrepreneurs can potentially raise the necessary funds more efficiently. Instead of spending time and effort on securing multiple smaller investments, entrepreneurs can focus on building relationships with a smaller number of investors who are capable of providing larger amounts of capital. This can streamline the fundraising process and allow entrepreneurs to allocate their resources more effectively.
However, it is important to note that raising the minimum check size is not without its challenges. It may require entrepreneurs to have a more compelling business opportunity, as investors who are willing to write larger checks often have higher expectations and demand a higher return on their investment. Additionally, entrepreneurs may need to have a well-established network and strong relationships in order to attract investors who are willing to write larger checks. This may require significant networking and relationship-building efforts, which can be time-consuming and resource-intensive.
In conclusion, raising the minimum check size is an important consideration for entrepreneurs when fundraising. By targeting investors who are willing to write larger checks, entrepreneurs can potentially benefit from more favorable relationships, financially stable investors, and a more efficient fundraising process. However, it is crucial for entrepreneurs to carefully consider the challenges and requirements associated with raising the minimum check size and to ensure that they have a compelling business opportunity that can meet the expectations of these investors.
Concept 5: Passion And Enthusiasm Drive Success
Passion and enthusiasm are powerful drivers of success, especially when it comes to fundraising for a business or project. This is evident in the podcast, where the speakers discuss their experiences and insights into raising money.
One key point that emerges from the conversation is the importance of building relationships and networking. The speakers emphasize the value of meetings and connections, highlighting how one meeting can lead to another and eventually result in raising the necessary funds. This demonstrates the significance of personal connections and the power of leveraging existing relationships to secure financial support.
Another interesting aspect discussed in the podcast is the idea of asking for advice instead of money. The speakers suggest that if you want money, ask for advice, and if you want advice, ask for money. This approach can be effective in building relationships and gaining the trust and support of potential investors. By seeking advice and showing genuine interest in their expertise, entrepreneurs can create a sense of partnership and collaboration, which can ultimately lead to financial backing.
Furthermore, the speakers emphasize the importance of authenticity and genuine excitement when presenting a business opportunity. They suggest that enthusiasm and passion are contagious and can resonate with potential investors who share the same values and interests. By effectively conveying their vision and mission, entrepreneurs can attract like-minded individuals who are willing to invest in their venture.
However, the podcast also acknowledges the potential pitfalls of relying solely on passion and enthusiasm. It cautions that having a compelling story and vision may not be enough if the business itself lacks substance. The example of WeWork is cited, where the founder raised billions of dollars based on his vision but ultimately faced significant challenges and had to leave the company. This highlights the importance of having a solid business plan and ensuring that the fundamentals of the business are strong.
In conclusion, passion and enthusiasm are indeed crucial drivers of success, especially when it comes to fundraising. The ability to convey genuine excitement and engage potential investors can create valuable connections and opportunities. However, it is equally important for entrepreneurs to back their enthusiasm with a solid business plan and ensure that their venture has a strong foundation. By striking a balance between passion and practicality, entrepreneurs can increase their chances of securing the necessary funds and driving their business towards success.
Concept 6: Building Trust Is Essential
Building trust is essential in any business venture, especially when it comes to fundraising. Trust is the foundation upon which relationships are built, and without it, investors are unlikely to invest in a venture. In the podcast, several key points are highlighted that emphasize the importance of trust in the fundraising process.
Firstly, the podcast mentions that most investors will invest in lines, not dots. This means that every interaction with an investor is an opportunity to create a line of trust. Each touchpoint, or "dot," contributes to the overall impression and perception of the entrepreneur and their venture. If these touchpoints are consistent and positive, it increases the likelihood that an investor will trust and invest in the venture.
Consistency is also a key factor in building trust. The podcast mentions that founders who consistently send monthly updates, even when they are not actively raising funds, are more likely to build trust with potential investors. These updates demonstrate transparency, commitment, and a proactive approach to communication. By consistently providing updates and demonstrating progress, entrepreneurs can establish trust and credibility with investors.
Another important aspect of building trust is being mindful of the tone and content of communication. The podcast advises entrepreneurs to strike the right tone in their emails and interactions. They should be honest, straightforward, and optimistic. However, it is also important to be cautious with sharing moments of difficulty or uncertainty. While it is important to be real and truthful, entrepreneurs should be mindful of not overwhelming investors with negative or uncertain information. Striking the right balance between honesty and optimism is crucial in building trust.
The podcast also mentions the importance of relationships in building trust. It emphasizes that fundraising is all about relationships, and most investors invest in people they trust. This highlights the significance of establishing and nurturing relationships with potential investors. Entrepreneurs should focus on creating positive and meaningful connections, demonstrating their expertise, and building rapport with investors. By investing time and effort in building relationships, entrepreneurs can foster trust and increase the likelihood of securing investment.
In conclusion, building trust is essential in the fundraising process. Trust is established through consistent communication, transparency, and a positive tone. Entrepreneurs should focus on creating lines of trust with potential investors by consistently providing updates and demonstrating progress. Additionally, they should be mindful of striking the right balance between honesty and optimism in their communication. Finally, entrepreneurs should prioritize building relationships with investors to foster trust and increase their chances of securing investment. By prioritizing trust-building efforts, entrepreneurs can enhance their fundraising success and drive their ventures towards success.
Concept 7: Verbal Commitments Are Important
Verbal commitments are important in the fundraising process for several reasons. Firstly, they serve as an indication of interest and potential investment. When potential investors verbally commit to a project or venture, it shows that they are interested and willing to consider investing their money. This is a crucial step in the fundraising process as it allows the entrepreneur to gauge the level of interest and potential funding available.
Verbal commitments also help in building momentum and creating a sense of urgency. When multiple investors verbally commit to a project, it creates a positive momentum and encourages other potential investors to consider joining the round. This sense of urgency can be further enhanced by setting a timeline for closing the round, which can create a fear of missing out (FOMO) among potential investors.
Furthermore, verbal commitments can help in securing an anchor investor. An anchor investor is someone who commits to a significant portion of the funding round, usually the largest amount. This anchor investor provides credibility and confidence to other potential investors, making it easier to secure additional funding. Verbal commitments from anchor investors can be used to attract other investors and create a domino effect, leading to a successful fundraising round.
However, it is important to note that verbal commitments are not legally binding. They are a preliminary indication of interest and should be followed up with proper documentation and legal agreements. Entrepreneurs should ensure that they have a clear understanding of the terms and conditions of the investment before proceeding with any commitments.
In conclusion, verbal commitments are an important step in the fundraising process. They provide an indication of interest and potential investment, help in building momentum and creating a sense of urgency, and can attract anchor investors. However, entrepreneurs should remember that verbal commitments are not legally binding and should be followed up with proper documentation and legal agreements. By effectively leveraging verbal commitments and building trust with potential investors, entrepreneurs can increase their chances of securing funding and driving their ventures towards success.
Concept 8: Importance Of Trust In Relationships
The podcast highlights the importance of trust in relationships, particularly in the context of fundraising and business transactions. The speaker emphasizes the value of having trustworthy individuals who have good character and tell the truth. These qualities are seen as essential in maintaining relationships and attracting investors.
Trust is a fundamental aspect of any relationship, whether personal or professional. In the business world, trust is crucial in establishing partnerships, securing investments, and ensuring the success of ventures. Investors need to have confidence in the entrepreneurs they are considering funding, and entrepreneurs need to trust that their investors will provide the necessary support and resources.
One example provided in the podcast is the story of an investor who wired money to an entrepreneur without any paperwork. This act was a demonstration of trust, as the investor believed in the entrepreneur's character and capacity to repay the investment. This level of trust is invaluable in business relationships, as it creates a solid foundation for collaboration and growth.
Trust is not only essential for individual relationships but also for the overall success of a business. The speaker mentions that investors need to have belief in the entrepreneur and the companies they are investing in. This belief is built upon trust in the entrepreneur's abilities, integrity, and commitment to success. Without trust, investors may hesitate to provide funding, which can hinder the growth and development of a business.
Furthermore, trust is crucial in the fundraising process itself. The speaker discusses the different types of funding rounds, such as convertible notes and priced rounds. While convertible notes are easier to raise, priced rounds require more legal processes and coordination. The speaker highlights the difficulty of bringing together a priced equity round, as it requires getting everyone around the table to agree and sign legal documents. Trust plays a significant role in this process, as investors need to trust that the entrepreneur will follow through with their commitments and provide a return on investment.
Concept 9: Coordination And Communication Are Key
Coordination and communication are key in any aspect of life, but they are especially crucial in the business world. This is evident in the podcast, where the speaker discusses the challenges of coordinating schedules, managing multiple stakeholders, and dealing with legal counsel during the process of closing a deal.
One of the main challenges highlighted in the podcast is finding a time when multiple busy individuals can be in the same physical location to sign documents. This requires effective coordination and communication between the parties involved, including the CEO, investors, and their respective assistants. Without proper coordination, it can take weeks to schedule a meeting and finalize the deal.
Another challenge mentioned is managing the various lawyers involved in the deal. These lawyers are paid hourly, so the more time they spend on the deal, the more money they make. This creates a potential conflict of interest, as the lawyers may prolong the process to increase their earnings. The CEO, as the quarterback of the deal, must effectively manage the lawyers and ensure that their actions align with the goal of closing the deal in a timely manner.
Effective communication is also crucial when dealing with investors. The CEO must keep them excited and informed throughout the process, addressing any concerns or objections they may have. This requires open and honest communication, as well as the ability to assertively address any issues that may arise. Investors appreciate founders who take charge and are willing to stand up for their interests.
Furthermore, the podcast highlights the importance of experience and practice in navigating these challenges. The CEO mentions that entrepreneurs only go through this process a few times in their career, while investors deal with it regularly. Therefore, it is essential for entrepreneurs to learn from their experiences and continually improve their coordination and communication skills.
Concept 10: Fundraising Is A Necessary Skill
Fundraising is a necessary skill in the business world. Whether you are a startup founder looking to secure funding for your new venture or an established entrepreneur seeking capital for an acquisition, the ability to effectively raise funds is crucial for success. In a podcast, the importance of fundraising is discussed, along with the skills and strategies needed to excel in this area.
One of the key points made in the podcast is that fundraising is a skill that cannot be delegated or outsourced. Unlike other aspects of business, such as marketing or engineering, fundraising requires the direct involvement of the entrepreneur. As the person putting the deal together, it is up to the entrepreneur to raise the necessary funds. This means that they must possess the knowledge, expertise, and charisma to attract investors and convince them to invest in their venture.
The podcast also highlights the fact that fundraising is not a passive endeavor. It requires active involvement and effort from the entrepreneur. Even if you have secured funding from investors, you still need to maintain open lines of communication, provide updates on the progress of the venture, and address any concerns or issues that may arise. This ongoing engagement with investors is necessary to build trust and maintain their support.
Furthermore, the podcast emphasizes the importance of building relationships with potential investors. Fundraising is not just about securing money; it is also about establishing partnerships and alliances that can contribute to the long-term success of the venture. Entrepreneurs must invest time and effort into networking, attending events, and building connections with investors who may be interested in their venture. These relationships can provide valuable guidance, mentorship, and access to resources beyond just financial support.
The podcast also touches on the fact that fundraising is a skill that can be learned and improved upon. Just like any other skill, practice and experience are key. By working with people who have successfully raised funds in the past, entrepreneurs can learn the strategies, techniques, and best practices for effective fundraising. By honing their skills in this area, entrepreneurs can increase their chances of securing funding and driving the success of their ventures.
Concept 11: Diversify Investments For Better Returns
Diversifying investments is a crucial strategy for achieving better returns in the business world. This is highlighted in the podcast, where the speakers discuss the importance of allocating resources prudently and balancing high-risk, high-reward investments with safer options.
One speaker mentions that only 5% or less of investments should be allocated to high-risk, high-reward opportunities. This highlights the need for caution and careful consideration when investing in ventures that have the potential for significant returns but also carry a higher level of risk.
The concept of diversification is further emphasized when the speakers discuss the importance of making multiple investments in order to increase the chances of getting a good return. They mention that angel investors should make around 40 investments to ensure that they have a few successful ones that can make up for the ones that don't yield any returns. This strategy spreads the risk and increases the likelihood of achieving better overall returns.
Additionally, the speakers discuss the different investment opportunities available, such as acquiring companies or investing in private equity. They mention that there are potential big wins to be had in these areas, but also highlight the need for careful consideration and understanding of the market dynamics. They mention that private equity investments can offer higher multiples and returns compared to other industries, but it is important to be aware of the liquidity requirements and timeframes associated with these investments.
The speakers also touch on the concept of secondaries, which is a way for investors to sell their positions in a startup or business. They mention that there are few companies with the necessary securities licenses to facilitate these transactions, highlighting the limited market for secondaries. This highlights the importance of considering liquidity and exit strategies when diversifying investments.
Concept 12: Fundraising Is Certainty And Excitement
The podcast episode titled "Fundraising is certainty and excitement" provides valuable insights into the world of fundraising and how entrepreneurs can navigate this process successfully. The guest, William from Fulcrum Venture Accelerator, shares his expertise and experiences in fundraising, offering valuable advice to listeners.
According to William, fundraising is a transfer of certainty and excitement. He emphasizes the importance of conducting thorough research and talking to the right people to gain certainty in oneself. By assembling all the necessary information and knowledge, entrepreneurs can build confidence in their fundraising efforts. This certainty is crucial when approaching potential investors or partners, as it instills trust and credibility.
In addition to certainty, William highlights the significance of excitement in fundraising. He suggests that entrepreneurs should be authentic and passionate about what is truly meaningful to them. By aligning their fundraising goals with their values and aspirations, entrepreneurs can generate excitement and enthusiasm among potential investors. This authenticity and passion act as a secret sauce and superpower in securing the deals entrepreneurs desire.
The combination of certainty and excitement forms the foundation for successful fundraising. Entrepreneurs who have done their research, gained confidence, and are genuinely excited about their venture are more likely to attract investors and achieve their fundraising goals. By leveraging these two elements, entrepreneurs can create a compelling narrative that resonates with potential investors and motivates them to support the venture.
Furthermore, the podcast episode also touches on the importance of building a network and seeking guidance from experienced professionals. William mentions that entrepreneurs should reach out to him via email or through the Fulcrum Venture Accelerator website to learn more about their programs and potentially collaborate. This highlights the value of networking and seeking mentorship in the fundraising process. By connecting with industry experts and leveraging their knowledge and experience, entrepreneurs can gain valuable insights and increase their chances of success.
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